What is an installment plan?
An installment plan is a payment agreement between a Collection Partner and a Debtor that allows the Debtor to pay off a debt in scheduled portions rather than as a single lump sum. This arrangement facilitates debt settlement when the Debtor cannot pay the full amount immediately but commits to regular payments over time.
Installment plans are governed by Section 07 of the Standard Debt Collection Agreement (SDCA). The SDCA sets out the rules for when a Collection Partner may arrange an installment plan and how the resulting payments are allocated.
Why installment plans matter
Installment plans serve multiple purposes in debt collection:
Higher recovery rates: Debtors who cannot pay a lump sum may still be able to settle the debt through manageable payments.
Structured commitment: A formal agreement creates accountability and a clear schedule for repayment.
Fair distribution: Pro-rata allocation ensures that both the Client and the Collection Partner receive proportional shares from each payment rather than waiting until full settlement.
Pro-rata payment distribution
When a Debtor makes payments under an installment plan, each payment is distributed on a pro-rata basis between the Client and the Collection Partner. This means that every instalment is allocated proportionally to cover:
The Collection Partner's success fee
Any additional fees (such as late payment fees and interest retained by the Collection Partner)
The remaining balance remitted to the Client
Rather than the Collection Partner keeping all fees from the first payments and remitting principal later, each payment is split according to the overall ratio. This ensures the Client receives funds steadily throughout the repayment period.
Example calculation
Consider the following scenario:
Principal claim | $10,000.00 |
Additional fees (interest, late fees) | $1,000.00 |
Total debt owed by Debtor | $11,000.00 |
Success fee rate | 15% of principal |
Success fee amount | $1,500.00 |
Number of instalments | 6 |
Instalment amount (approx. each) | $1,833.33 |
Allocation per instalment:
Component | Calculation | Amount |
Success fee portion | $1,500.00 / 6 | $250.00 |
Additional fees portion | $1,000.00 / 6 | $166.67 |
Total to Collection Partner | $250.00 + $166.67 | $416.67 |
Amount to Client | $1,833.33 - $416.67 | $1,416.66 |
For payments 1 through 5, the Client receives approximately $1,416.66 and the Collection Partner retains approximately $416.67. The final instalment is adjusted by a few cents so that the totals reconcile exactly: the Client receives $8,500.00 in total (the principal minus the success fee) and the Collection Partner retains $2,500.00 in total (success fee plus additional fees). This small rounding adjustment on the last payment is standard practice when splitting fixed amounts into equal instalments.
If anything in this page conflicts with the Standard Debt Collection Agreement (SDCA), the SDCA is the legally binding source of truth.
Effect on the collection period
When a Debtor signs a payment agreement (such as an installment plan), the collection period is automatically extended by 12 months from the agreement date. This extension also applies when any actual payment is made by the Debtor.
The extension ensures that the Collection Partner maintains exclusive rights to work on the case while the Debtor is actively paying under the agreed schedule.
Impact by actor
Client
Receives a proportional share of each instalment payment rather than waiting for full debt recovery.
Must approve installment plans that extend beyond six months before the Collection Partner can finalise the agreement.
Cannot withdraw the case during an active collection period without paying the full success fee (as instalments extend the collection period).
Collection Partner
May arrange installment plans of up to six months without Client approval.
Must obtain written Client approval for plans exceeding six months.
Receives a proportional share of each instalment (success fee and additional fees) rather than collecting fees only after full recovery.
Can view all payment and payout records in the Partner Balance section of the partner portal.
Debtor
Can settle debt through manageable periodic payments instead of a single lump sum.
Commits to a formal repayment schedule negotiated with the Collection Partner.
Debitura
Provides the platform infrastructure for recording payments and calculating pro-rata payouts.
Does not participate directly in installment negotiations between the Collection Partner and Debtor.
What to expect
Each instalment payment made by the Debtor is recorded as a separate payment in the system. The corresponding payout is calculated automatically using pro-rata allocation. Clients and Collection Partners can view individual payment records and payout breakdowns through their respective portals.
For broader context on how payments flow between parties, see Payments, payouts and invoicing.